Yes, a trust can hold business shares in Ontario, and it’s actually a common and strategic tool used by business owners for succession planning, tax optimization, and asset protection.
How Trusts Hold Business Shares
1. Family Trusts
A family trust can hold common or preferred shares of a private corporation.
The trustees manage the shares on behalf of the beneficiaries, who may include children, grandchildren, or even corporations.
This structure allows for income splitting, capital gains exemption planning, and control without direct ownership1.
2. Benefits of Using a Trust
Tax Efficiency: Income can be allocated to beneficiaries in lower tax brackets.
Estate Planning: Helps avoid probate and simplifies succession.
Creditor Protection: Assets in a trust are generally shielded from personal creditors.
Flexibility: Trustees can decide how and when beneficiaries receive income or capital2.
3. Estate Freeze Strategy
A trust can be used in an estate freeze, where the current owner exchanges common shares for preferred shares.
The trust then subscribes for new common shares, capturing future growth for the next generation.
This defers capital gains tax and locks in the current value for estate planning3.
⚠️ Considerations
Legal Setup: Requires a properly drafted trust deed and professional advice.
Tax Rules: Trusts are subject to complex tax rules under the Income Tax Act.
Trustee Duties: Trustees must act in the best interest of beneficiaries and follow the trust’s terms.
Disclaimer:
The content on this website is provided for general informational purposes only and does not constitute legal or professional advice. Visitors are encouraged to seek specific legal guidance by contacting the lawyers at Carson Law or their own legal counsel regarding any particular matter. Carson Law does not guarantee the accuracy, completeness, or currency of any information on this website. The materials published here are current as of their original publication date and should not be relied upon as accurate, complete, or applicable to any specific situation.
If you have further questions or concerns, please contact Carson Law and one of our lawyers would be happy to help.
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